This Major Risk To Shale Production Is Subsiding, But Not Gone Yet

I’ve talked the last several months about a little-discussed looming issue in the shale patch.

Earthquakes.

A few weeks ago, Pennsylvania regulators made the first-ever connection between fracking activity and quakes. Concluding that small but measurable tremors had been caused by fracking in the Marcellus and Utica shales carried out by Hilcorp Energy.

The issue has in fact become so pronounced that the U.S. Geological Survey this week weighed in with a full report — releasing a forecast of human-induced seismic activity for some of the biggest drilling locations across America.

The news was generally good for the oil and gas business. With Survey researchers decreasing their forecast for manmade quakes as compared to last year.

That downgrade for quake risk came as the Survey said 2016 saw fewer “felt earthquakes” than in 2015. Showing that seismic activity due to fracking activity seems to be subsiding.

But researchers stopped short of giving an all-clear for shale drilling. Saying that parts of Oklahoma and Kansas still face significant risks of earthquakes induced by the oilpatch.

Overall, the USGS pegged the chance of damaging quakes across Oklahoma at 1%. But in local areas of intense drilling the odds were higher — with north-central areas of the state facing up to a 12% chance of manmade shaking.

One of the key questions here is: why is quake activity subsiding? USGS scientists were undecided — saying that the fall in 2016 could have been due to stronger regulations around water injection (which has been blamed as the main culprit for seismicity in Oklahoma), or alternatively simply due to a general decline in drilling activity during the past year.

If industry practices around wastewater really are getting better, we should see quakes abate further. But if the 2016 fall was due to lower drilling rates, 2017 could bring a renewed rise given that rig counts have been steadily increasing the last few months.

Watch for more news on quakes (or lack thereof) in the big U.S. shale plays, especially around Oklahoma. Any flare-up could turn into a significant issue for producers.